In a statement, a representative of Ferguson's confirmed the authenticity of the video and the duchess released her own statement to express her regret.

"I very deeply regret the situation and the embarrassment caused," Ferguson, 50, said. "It is true that my financial situation is under stress however, that is no excuse for a serious lapse in judgement and I am very sorry that this has happened. I can confirm that The Duke of York was not aware or involved in any of the discussions that occurred.

"I am sincerely sorry for my actions. The Duke has made a significant contribution to his business role over the last 10 years and has always acted with complete integrity," she said.

Royal historian Robert Lacey pointed out that these types of tabloid stings have almost become "national sport." The general consensus in and around London, he said, is one of sorrow for Ferguson, rather than anger.

But it is likely her actions will have some impact on the royal family.

The prince's office also released a statement in light of the scandal in which he "categorically" denied any knowledge of the duchess' meeting. The two have lived together for years and while Lacey predicted that arrangement would continue, their relationship may change in the eyes of the public.

And behind palace doors, Ferguson is likely to take a hit. Her relationship with her ex-husband's family has always been strained.

"I think it's going to be chilly for a bit," Lacey said. "It's Prince Phillip who doesn't like her and I think this is going to confirm his worst fears."

While the video is certainly embarrassing for the duchess, The Associated Press reported it's unlikely she did anything illegal.

Sarah Ferguson: The 'Duchess of Debt'?

Last year Ferguson admitted to being roughly $889,000 in debt after the collapse of her U.S.-based lifestyle company, Hartmoor. The loss led some in the British press to dub her the "Duchess of Debt."

Lacey said Ferguson only gets about $20,000 a year from her divorce settlement with Prince Andrew, compared to the $20 million settlement Princess Diana got when she divorced Prince Charles.

"I think she should have had different divorce lawyers and she's had to struggle with that ever since," he said.

While Ferguson was caught red-handed, Lacey said he doubts it will irreperably harm her in the long run.

"She's been a wonderful mother and she's also been a great source of delight to us royal watchers," he said. ""I think she's going to be back."

This is not the first time wasn't the first time the duchess found herself in financial trouble.

In 1996, as she was divorcing Prince Andrew, British tabloids were abuzz with the news that she owed more than $4 million to British bankers Coutts and Co. and that the royal family, specifically Queen Elizabeth II, was fed up with Ferguson's free-spending ways and refused to pay her bills.

After the divorce, Ferguson moved to New York and is said to have slowly regained her financial footing. She wrote a successful series of children's books and signed a lucrative and high-profile deal to be the spokesperson for Weight Watchers International.

In addition, to The Sarah Ferguson Foundation, Ferguson also started the charity Children in Crisis. In an interview on "Larry King Live" in 2001, the Duchess admitted that there had been a time when she was financially "out of control" and that it took years to earn the money pay off her debt.